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By Stella Qiu
SYDNEY (Reuters) – Australian employment accelerated earlier forecasts in December, even as the unemployment rate rose as many more people went looking for work, the combination of trends pointing to a healthy labor market that leaves the possibility of a short-term rate cut is alive.
Buoyed by an increase in part-time roles, net employment rose by 56,300 in December from November, when it rose by a downwardly revised 28,200, Australian Bureau of Statistics figures showed on Thursday.
The December jump was well above market consensus for a 15,000 rise.
Annual employment growth accelerated to 3.1%, more than double the historical average. The labor force also expanded at a similar rate.
The unemployment rate rose to 4.0% from 3.9%, as expected, while the participation rate rose to an all-time high of 67.1% from 67.0%.
“Overall, it’s pretty messy, but it will characterize the labor market as quite strong … It still leaves that basic message that the labor market remains quite tight,” said Shane Oliver, AMP’s chief economist.
The slowdown in wage growth also suggests that the labor market is not a source of inflationary pressures.
“So it leaves the Reserve Bank in a difficult position … I think ultimately the February rate call will depend on the inflation figures for the December quarter when they come out,” Oliver said.
The RBA expects core inflation in the fourth quarter to stand at 0.7%. Anything below that number would make it difficult for the RBA not to cut rates next month, Oliver said.
Market reaction to the employment data was muted. The Australian dollar rose 0.1% to $0.6230. Three-year bond futures pared earlier gains but were still up 8 ticks at 96.06 on the back of overnight UK and US domestic inflation figures.
Trades still imply a 68% chance the RBA will cut rates on February 18, after the quarterly inflation report and another reading on retail sales, which is expected to show a pullback from sales in December after a good showing in the previous month.
The RBA has held policy steady for a year, judging that the current cash rate of 4.35%, up from 0.1% during the pandemic, is tight enough to bring inflation to its target band of 2-3% while preserving employment gains.
The central bank turned unexpectedly dovish last month as economic growth has remained anemic. The rise in consumer spending has been disappointing even with the government’s tax cuts.
Data on Thursday showed part-time jobs rose by 80,000 in December, while hours worked rose a sharp 0.5%.
